The Lucas Critique and the Volcker Deflation
AbstractThis paper examines, in light of the Lucas Critique, the behavior of the Phillips curve and of the term structure of interest rates after October 1979. It starts with an informal account of the policy change and then discusses how we might expect these two relations to shift after such a change. It finds little evidence of a direct effect of the policy change on the Phillips curve, at least until 1982. It finds substantial evidence of a direct effect on term structure.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1326.
Date of creation: Apr 1984
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Publication status: published as Blanchard, Olivier J. "The Lucas Critique and the Volcker Deflation." American Economic Review, Vol. 74, No. 2, (May 1984), pp. 211-215.
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